How the definition of digital insurance became clear

The insurance industry has had more than its fair share of buzz words over the years. And while these buzz words have varied wildly in terms of topic, many have shared one common trait: They’re nearly impossible to define.

For a time, that was certainly true for one of our hottest current buzz words: digital insurance. And a lot of virtual ink has been spilled trying to define it.

Recently however, it has become increasingly clear just what the term “digital insurance” means for the individual market (personal lines, life insurance and investments).

  • At issuance, digital insurance is about the consumer procuring investments or cover for risk brokered by aggregation technology to find the best product, and straight-through automated processing to complete the transaction.
  • In claims, digital insurance is about the execution of an automated process from first notification of loss (FNOL) to settlement with minimal human intervention.
  • And in infrastructure, it is about the use of Infrastructure as a Service to enable elastic hosting and storage capabilities with a usage-based cost structure.

We are able to more precisely define digital insurance because five key dimensions of digital have become more clear:

  • Customer engagement: The use of any technology by a consumer to engage with any relevant aspect of the insurance process.
  • Sales process: The evolution of the broking process to offer Web-based product selection and fulfilment.
  • Risk analytics: The use of data crunching software to calculate the probability and size of a risk with greater granularity and more accuracy.
  • Claims automation: The use of consumer technology by the claimant to register and record claim events enabling rapid validation and settlement.
  • Technology infrastructure: The use of infrastructure as a service to provide an elastic hosting and storage capability to allow an automated process to perform.

Barring deliberate compromises to achieving a complete digital process — such as the uniquely human elements of process in advisory services, claims adjustment and claims settlement — we understand what digital looks like for individual insurance and investment. Sufficient elements have been implemented to demonstrate the validity of these processes. The barrier now is not the limits of technology, but the limits of customer culture and appetite for investment on the part of the insurer.

While the global definition of digital insurance (for individual lines) has become clearer, maturity levels still vary dramatically, due to factors including country, technology, regulation and consumer acceptance. Only in the UK, for example, is personal lines broking dominated by price comparison aggregators because of consumer acceptance. Mobile phones play a more significant role in consumer engagement with personal lines in the U.S. than in Europe.

Digital is both advanced and works in individual insurance because the risks faced by every customer are similar enough to allow for a sufficiently standardised approach. In other words, the variables required to price the risk are sufficiently common between insureds and on a sufficiently manageable spectrum to allow a high level of automation. As we’ll discuss in future posts, the same cannot be said in other sectors of the insurance industry.


molineuxpatrick_headshotPatrick Molineux is UKIN General Manager for Insurance at CSC, responsible for leading CSC’s insurance business in the UK, Ireland and the Netherlands. He reports to Phil Ratcliff, General Manager Global Insurance and Craig Wilson, Regional General Manager for the UKIN region. Since joining CSC, Patrick has worked as a business consultant and project manager in marketing and market development and in sales, sales support and sales management. Prior to joining CSC in 1996, Patrick’s experience consisted of 9 years in the insurance industry working as a business analyst and project manager. He holds a BA in History from the University of York

 

RELATED LINKS

Digital insurance: From policy-centric to customer-centric

As insurance goes digital, ignore these 3 trends at your peril

What is Usage-Based Insurance – and why do insurers need it?

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